StatsCan book reveals the new face of retirement

With the coming wave of retiring baby boomers, the decisions women make will probably have the greatest impact on the shape of retirement in the future, according to a new book released by Statistics Canada.

Many of the book’s themes will be of particular interest to advisors: self-employment numbers are expected to grow and more Canadians will likely return to work after retirement for financial reasons.

The book, entitled New Frontiers of Research on Retirement, says broad social changes are forcing Canadians to rethink their traditional ideas about retirement. “The baby boom generation, the vanguard of whom turns 60 this year, has caused fundamental changes in every social institution it has touched. Retirement will be no exception,” say the authors.

The 458-page book is being published by the Unpaid Work Analysis Division of Statistics Canada. A large part of the book is devoted to scientific papers that are based on Statistics Canada’s data.

The main themes covered include gender differences in retirement patterns, the major impact women will have on retirement decision making processes in Canadian families, growing concerns about future financial security and maintaining living standards, and the trend towards more flexible working and retirement paths.

Gender differences in retirement patterns will be unique and much more prominent once boomers start retiring. The report’s authors say “baby boomer women will be the first female cohort to have participated in the labour force for most of their adult lives. They will start their transitions with far higher levels of pension coverage than earlier female cohorts. The behaviour of baby boomer women will greatly influence what Canadian retirement looks like in the futures.”

The studies show that women are more likely to include unpaid work, care giving and volunteering in their retirements and tend to complete the transition from paid work to unpaid work much faster than men.

Women are also more likely than men to be forced into retirement as a result of involuntary job changes. As well, women have a greater likelihood of experiencing involuntary retirement to take care of family matters. In 2002 12% of women retired to take care of a family member. Only 6% of men did the same.

At the same time, the increasing number of Canadian women with substantial pension benefits is making retirement timing decisions more complex. In 2002, 48% of women and 46% of men said they expected to retire at the same time as their spouses. This number jumped to 60% for women who were the same age as their husbands and fell to 39% for women who were five to nine years younger.

Interestingly, the expectation of joint retirement is different for salaried and self-employed workers. For example, 68% of self-employed women expect joint retirement, compared to 44% of those surveyed who work for an employer. Not surprising, women in managerial or professional occupations, along with those who contribute most of the household income, are more likely to consider the timing of their retirement independently from their spouse’s.

Perhaps the most interesting part of the report for advisors details the new vulnerabilities Canadians are feeling about their standard of living in retirement. Declining stocks have pushed many pension plans into deficit, and Canadians are living longer, putting additional pressure on plan funding. The problem is also being compounded by the sheer number of boomers claiming benefits.

Almost one-fifth of those surveyed in the 2002 General Social Survey said they did not intend to retire at all. Also, many who took early retirement are going back to work for financial reasons. The report says the rising prevalence of non-standard work arrangements, like contract work, part time and casual jobs, is also worsening the financial security of future retirees since workers in these arrangement generally do not have on going relationships with a particular employer, thus limiting their access to workplace pension plans.

Pension plan and financial education will be critical, StatsCan says. “A challenge for employees of all ages is to better understand how to plan financially, how government pensions work, what kinds of pensions or retirement savings plans are available, the risks associated with different plans and how to effectively manager personal savings and debt.”

Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com